The Benefits of a Reverse Dutch Auction

Understanding the best auction type for your tender process can sometimes be a challenge. When it comes to the Reverse Dutch Auction, it’s sometimes as difficult to get your head around what it is, as how it works. So let’s explore what a Reverse Dutch Auction is, how it can help you keep costs low, and how to set the relevant conditions of this auction on Procurehere.

What is a Dutch Auction?

A Dutch Auction is a type of auction where the price of a particular product or service begins at a high point, and gradually falls over until a successful bid is made and accepted. That means the price decreases in pre-set time increments. This type of auction actually originates from the iconic Dutch flower markets – hence the term ‘Dutch Auction’.

What is a Reverse Dutch Auction?

While a traditional Dutch Auction starts at a high bid which will then decrease, a Reverse Dutch Auction actually starts at a low price, then gradually increases over time. It makes sense when you think about it, but let’s explore an example.

You’ve sold your office printer, and now you’re looking for a sleek new model to purchase and have installed at your office. With a Reverse Dutch Auction you set the lowest price that you feel is reasonable to pay for the equipment and installation of RM800. You then set an increasing price increment of RM50, due to increase every hour. After 4 hours the price has increased by RM200, and a bidder decides to accept this price and agree to supply and install your printer for RM1,000.

What are the benefits of a Reverse Dutch Auction?

Reverse Dutch Auctions through Procurehere offer the opportunity for buyers to link up with a suitable supplier at the best possible price for their goods and services. Meanwhile, suppliers have access to a platform that offers a transparent and user-friendly bid system for taking part in a wide range of globally hosted tender projects.

There are many benefits to a Reverse Dutch Auction for both buyers and suppliers when undertaken correctly. They offer a highly effective way to manage costs and increase the efficiency of the RFQ process, while ensuring that both sides have clear oversight of the quantities, timing and pricing of a particular project. But how do you go about setting this up in Procurehere?

Setting the conditions of a Reverse Dutch Auction in Procurehere

Reverse Dutch Auctions are just one of the auction types available in Procurehere. Each auction can be set up from scratch, or launched using a pre-existing template to ensure an easily deployed auction solution that fits your business needs. It’s important to note that you can’t adjust an auction type once an auction has gone live.

With a Reverse Dutch Auction you must first choose an auction starting price, this is the low starting price which will gradually rise during the course of the auction. Once a starting price is chosen, it’s important to note your maximum price. This is the highest possible price you are willing to pay for these particular goods or services.

Next, choose the price increments, the time measurement, and the interval between increases. This will set the relative amount that the auction will increase by, and over what period of time. It’s important to ensure that you allow time for bidders to view and react to price increases. You don’t want the auction price rocketing up too quickly without key suppliers able to bid.

Since 2002, auctions on Procurehere have helped save an average of 17% per event for buyers, helping ensure efficient, cost-effective procurement for our users. Understanding and implementing the right type of auction can have a big impact on the benefits for your business. If you want to find out more, explore our helpful guides on auctions on Procurehere.

Here are other related articles you may be interested in